The Bank of Scotland has been fined £750,000 by the City's watchdog for putting 30,000 PEP and ISA customers "at risk of losing money", it was announced today.

The Financial Services Authority (FSA) said it had fined BoS for the failure of its ISA and PEP department to administer customers' funds appropriately.

In a statement the FSA said: "This put 30,000 PEP and ISA customers at risk of losing money and also exposed BoS to increased risks of fraud.

"From November 1999 until August 2001 problems with BoS systems used to administer PEPs and ISAs meant that the bank could not be sure how much money it was holding on behalf of individual customers."

The FSA said the problems were caused by "systemic failings in controls and inadequate staff training".

It added that BoS had now addressed these weaknesses and was paying compensation where this was due.

Andrew Procter, director for enforcement at the FSA, said: "Investors are entitled to be confident that their funds are being accurately administered.

"This case demonstrates why regulated firms must have good processes and procedures in place to ensure that this happens. The combination of inadequate controls and the lack of staff training were a systemic weakness in Bank of Scotland's PEP and ISA department.

"Such systemic weakness not only puts investors at risk but also increases the risk of fraud going undetected."

A spokeswoman for the FSA said: "People weren't credited with interest payments on time, meaning they couldn't use the money to invest."

She added the fine was imposed because of the "potential" for customers to lose money.

BoS will have to pay a total of £10,350 compensation to 5,549 customers, which the FSA said was "very small" because of the general fall in the value of shares.